Daily Economic Update

Kuwait: Central bank unveils targeted stimulus package to strengthen banking sector resilience. The Central Bank of Kuwait (CBK) unveiled on Thursday a targeted stimulus package aimed at reinforcing banking sector resilience and ensuring uninterrupted credit activities amid elevated geopolitical uncertainty. The measures include a temporary easing of key macroprudential ratios, with the minimum Liquidity Coverage Ratio and the Net Stable Funding Ratio both reduced from 100% to 80%, and the minimum Regulatory Liquidity Ratio lowered from 18% to 15%, thereby enhancing banks’ short-term liquidity flexibility. The CBK also raised the Maximum Lending Limit from 90% to 100%, expanding banks’ capacity to extend credit to households and businesses. In parallel, the CBK authorized the release of 1% of the Capital Conservation Buffer, lowering the total regulatory capital requirement from 13% to 12%, to support banks’ balance sheets and sustain lending activity. The CBK reaffirmed that these measures, grounded in the sector’s strong financial indicators and robust capital and liquidity positions, are intended to prevent short-term liquidity pressures while ensuring that banks continue to operate with high efficiency and reliability.

Oil: Prices post weekly gain as ceasefire chatter fails to calm markets. Brent futures managed to post a modest 0.3% w/w gain, settling at $112.6/bbl on Friday, though the weekly change masks the significant intraday and intraweek volatility. Prices came under heavy pressure on Monday after media reports – later confirmed by the White House – revealed that Washington had submitted a 15 point peace proposal to Tehran, prompting a sharp slide in crude. By mid week, Brent looked poised for a weekly loss, but sentiment reversed on Thursday and Friday as Iran rejected the offer as overly one sided and countered with its own maximalist terms and the market refocused on additional US troop deployments to the region ahead of a potential ground incursion. This more hawkish signal outweighed the latest conciliatory move from President Trump, who extended the pause on planned strikes against Iranian power infrastructure for a second time, pushing the deadline out to April 6. Risk premiums were further reinforced over the weekend after Yemen’s Houthis announced their entry into the conflict, launching two waves of attacks on Israel. Their involvement significantly heightens maritime security risks, particularly for tankers transiting the Bab El Mandab Strait, a key global shipping chokepoint. Meanwhile, Iran has agreed to allow 20 Pakistani flagged vessels – at a rate of two per day – to pass through the Strait of Hormuz, underscoring Tehran’s leverage over regional vessel traffic at a time when tanker flows remain highly sensitive to evolving geopolitical dynamics.

US: Fed officials wary of inflation amid fallout from the Middle East war; US markets under pressure. Three Fed governors cautioned about rising inflation uncertainty due to higher energy prices amid the ongoing war in the Middle East. Fed Vice Chair Philip Jefferson expected “overall inflation to move higher, reflecting a rise in energy prices” at least in the short term and saw the current policy stance “well-positioned to determine the extent and timing of additional adjustments to our policy rate." Though he emphasized that the duration of the war and the longevity of the current uptrend in energy prices would be key in assessing the overall impact on inflation. He expressed that the job market was “roughly in balance,” but with risks “skewed to the downside.” Governor Lisa Cook mentioned that “the inflation risk is greater right now as a result of the Iran war,” with the labor market in balance but “precariously so.” Governor Micheal Barr reiterated his previous remarks, saying “given the considerable uncertainty about the potential effects of developments in the Middle East on our economy,” the “current policy stance puts us in a good place to hold steady.” Meanwhile, Governor Stephen Miran pitched to trim the Fed’s $6.66 trillion balance sheet, echoing Fed Chair nominee Kevin Warsh’s previous views, highlighting those contractionary effects of balance sheet reduction “can be offset with a lower federal funds rate.” However, Miran underscored that he “would counsel a slow pace of reductions to ensure the private sector can absorb all the securities shed off from our own balance sheet.” Finally, in data news, initial weekly jobless claims (w/e March 21) rose to 210K from 205K the previous week but remained relatively modest overall and hovered around a narrow range of 200-215K over the past several weeks. Continuing claims (w/e March 14) dropped to 1.82 million from 1.85 million for the week ending March 7. As the Middle East war has entered its fifth week, the US financial markets have continued to reel. The S&P 500 fell 1.7% last Thursday as well as Friday, bringing its total decline to 7.4% since the war began, and closing at the lowest level since early August 2025. Meanwhile, the yield on UST 10Y continued to trend higher, breaching 4.4% and closing near the highest since July 2025.

UK: Retail sales fell in February even before the expected inflation resurgence. Retail sales volumes in February fell by 0.4% m/m after January’s 20-month high growth of 2%, but came better than the consensus forecast of a 0.7% drop, reflecting a pullback in consumer spending following a very solid increase at the start of the year and rainy weather conditions in February. On an annual basis, retail sales growth eased to 2.5% from an upwardly revised 4.8% in January. Separately, the Gfk consumer confidence index fell to -21 in March from -19 in February, the lowest in 11 months. Amid the Middle East war, the impact of higher energy prices on inflation, supply chain disruptions and potentially elevated policy interest rates, consumer sentiment may dampen further, weighing on household spending and the overall economy over the coming months.

China: Reciprocal trade investigations set the stage for the Trump-Xi summit. China’s Ministry of Commerce has initiated reciprocal trade investigations into US practices that Beijing says restrict the flow of Chinese goods and hinder global supply chains. The announcement comes ahead of a planned Xi-Trump summit in mid-May and mirror the Section 301 investigations launched by the US earlier this month into Chinese industrial capacity and labor issues. The move by China indicates a calibrated effort to assert leverage before the high-level talks. The investigations will assess whether US actions disrupt trade in green and high-tech products, sectors critical to both countries’ economic strategies. Each probe carries a six-month review period, with the option for extension, allowing Beijing to time potential countermeasures. Additionally, the actions highlight China’s broader attempt to position itself as a defender of supply chain stability while framing the US as a source of disruption.

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